Cornell Research Questions whether Customer Loyalty Programmes Really Work

Service companies may want to rethink the billions they spend on customer-loyalty programs. A new research report from Cornell graduate Iselin Skogland and Cornell faculty member Judy Siguaw indicates that brand switching sometimes occurs even among a hotel’s most satisfied guests, while some of the least satisfied guests cannot be bothered to do the same.

The report analyzed behavior according to four distinct guest segments -- satisfied switchers, dissatisfied switchers, satisfied stayers, and dissatisfied stayers. Two groups, satisfied stayers and dissatisfied switchers, generally behave as one might expect, either staying or defecting based on their level of satisfaction. The other two groups, satisfied switchers and dissatisfied stayers, do not conform to expectations.

Most confounding are satisfied switchers, who report being satisfied but then choose alternative hotels, rather than routinely choosing the hotel where they have had satisfactory experience. Thus, although marketers have long held that guest satisfaction is instrumental in ensuring repeat business, satisfaction does not appear to drive repeat purchases for all consumers. Also intriguing, dissatisfied stayers are unwilling or unable to exert the effort to identify and use alternative hotels, even though they are unhappy with elements of the hotel at which they stay.

The report indicated that business travelers were the least satisfied, least loyal, and least involved of the guest segments. Results further showed that among the four segments, business travelers were most likely to be dissatisfied switchers.

“Hotel managers can use this information to better define those groups with which they want to develop strategic investments and drive the greatest long-term value,” said Dr. Siguaw. “Hotel companies might find value in refining their customer-retention programs to aim at customer groups most likely to respond to those programs.” To access the report, please click here (note the link is for a PDF file).